stoictrader

Mistakes Were Made – Feb 2012

In Mistakes Were Made on March 10, 2012 at 1:59 pm

Every month I post a few thoughts about trading mistakes that were made in the previous month and how I might correct them in the following month.  During January I noticed that I was making too many small trades, was inconsistent about record keeping, and deviating from the trading plan (which was out of date). In February I updated my trading plan, made about 50% fewer trades and was very consistent about record keeping.

In February I was basically breakeven, with a slight loss of less than 1% of trading capital.  My win/loss ratio was about 40% which was an improvement from the previous month, but my profits were smaller on average (about 30-50 pips) and losses remained in the 20-40 pip range.  Mistakes (unforced errors) included:

1. Moving stops to breakeven too soon.  Looking back, I was stoped out of far too many trades at breakeven which went on to move in the direction of my trade. While this type of tight stop management improved my win/loss ratio (limiting losses), it severely limited my profits, including missing out on some 200+ pip profits.

2. Missed opportunities to take partial profits.  There were a number of times when I had a trade at 20 to 50 pips profit (but not yet at my target) and I moved my stop to breakeven but did not take partial profits.  Again, with so many trades subsequently being stopped out at breakeven I missed some easy profits.  Having a T1T2 strategy could fix this, and/or trading bigger but exiting half quickly.

3. Targets were not clearly identified.  I had clearly defined entry points and stops but my targets were much more general.  In hindsight, this meant that my exits were underwhelming in February, and exits are the name of the game.

In the past I have used one account for long trades and another for shorts (both at the same broker).  This allowed me to hedge if necessary (which I rarely do) and to monitor if I was better on the long or short side of the market, but is difficult to monitor specific strategies since I put all long trades from multiple strategies in one account, and same for shorts.  I like the dual/multiple account strategy but am thinking about changing this to: shorter term and longer term trades, or very specific trade strategies in 2-4 accounts.

Comments or suggestions welcome!

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